Horizon Global Corporation
Q1 2020 Earnings Call Transcript

Published: 18 May 2020

[Operator:]

Good morning everyone and welcome to the Horizon Global's First Quarter 2020 Conference Call. My name is Alisa and I will be your operator for today's call. All participants will be in a listen-only mode until we reach the question-and-answer session of the conference call. This call is being recorded at the request of Horizon Global. If anyone has any objections, you may disconnect at this time.I would now like to introduce Mr. Jeff Tryka with Lambert IR, Horizon Global's Investor Relations firm. Mr. Tryka, you may proceed.

[Jeff Tryka:]

Thank you, operator. Good morning and welcome to Horizon Global’s first quarter 2020 conference call and webcast. On the call today are Terry Gohl, Horizon Global’s Chief Executive Officer; and Dennis Richardville, Horizon Global’s Chief Financial Officer.Earlier this morning, we announced our first quarter 2020 results. The release is available on many new sites as well as in the Investor Relations section of our website at horizonglobal.com.Turning to slide two, today’s presentation includes non-GAAP disclosures. These disclosures are reconciled to GAAP in the appendices of our quarterly press release and presentation, both of which are available in the Investor Relations section of our website at horizonglobal.com.Turning to slide three, I'd like to remind you that statements in today's presentation will include our views about Horizon Global’s future performance, which constitute forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements.We’ve described these risks and uncertainties in our Risk Factors and other disclosures in the company’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission.With all that being said, I'd like to turn the call over to Horizon Global’s Chief Executive Officer, Terry Gohl. Terry?

[Terrence Gohl:]

Thank you, Jeff and welcome to Horizon Global's first quarter 2020 earnings call. Thank you to each of you who are attending this morning's call and from team to yours, we hope that you and your families remain safe and healthy during this unprecedented time in history.Time has flown by since our call as it seems only yesterday that we were describing to you the company's status and the outlook for the first quarter. During that call, we described the actions which we had taken in the performance metrics results that we were recognizing.We also provided an outlook for the first quarter that reflected these performance improvements. Our momentum was strong relative to sales and performance. We were confident. How the world has changed since then.In early March, the initial impact of the COVID-19 virus outside of China began to be seen. We adjusted and rapidly established new operational plans and safety and health protocols and procedures, with our employees' well-being as our focus.By mid-March, the virus progressed to a full global pandemic level and once again, we took necessary steps to further flex our operations, which ranged from full shutdown level across most of our European operations and for a short time in our Mexico operations to reduce volume resizing at our other operations around the globe.In spite of this and bolstered by our operational improvements that they described in our last call, we still performed well during the quarter and provided solid results both on an absolute basis and on a period-over-period comparison. The Horizon team performed exceptionally during this period and I couldn't be more proud to represent them and the results they generated on this call today.So, let's look at some of these metrics. Turn to page five, please. As a company, we've continued to focus on our cash performance and improving our liquidity position. We have worked hard to improve our performance internally across all cash-related metrics and has successfully executed on refinancing activities targeted in our timeline for Q1.Relative to cash generation, you will note the company generated positive cash from operations for the period of $5.7 million. This reflects a $55.3 million improvement over the same period in 2019, a significant improvement in performance.Working capital management details will be described by Dennis later in this presentation, but in summary, we posted solid period-over-period improvements on day sales on hand and days inventory on hand of five days and 11 days, respectively. These results were generated through enhanced organizational focus, operational efficiency improvements, and related systems.Even with these results, there remains significant opportunities for improvement going forward. Our team is relentlessly working on further solutions to achieve optimal performance across all ordered cash related work stream.During the quarter, we successfully addressed the maturity of our U.S. and Canada ABL through refinancing of it with Encina Business Credit. Again, Dennis will review the details of this later in the presentation, but the result increased both availability and flexibility for us. This was a great result for the company.As a result of our strong operational cash generation in our new ABL facility, we improved our liquidity position $250.8 million, reflecting an $8.5 million improvement as compared to quarter one in 2019. Again, a great result for the company.Net sales were negatively impacted by the COVID across the globe resulting in a year-over-year reduction of $14.4 million. The sales decline was concentrated in the month of March. Despite this, we generated positive results.Operating losses were reduced by 50% year-over-year versus the same period in 2019, reflecting a 340 basis point improvement in operating margin. Adjusted EBITDA at $2.9 million, improved by $4 million year-over-year versus the same period in 2019, this reflecting a 240 basis point improvement in adjusted EBITDA margin,Operational improvement initiatives and SG&A optimization action supported these results as reflected in a 280 basis point improvement regarding cost of goods sold and a 14% or $5.5 million improvement in SG&A-related costs compared to 2019. Actions taken in prior periods began to show value during the quarter, i.e. headcount actions where severance-related expenses rolled offTuring the page six. Each time we present our results, we highlight the advancements and improvements we are making throughout our operations across the globe. We celebrate these successes as steps that are part of our plan to return to the profitability levels that we expect for our business.With so much focus and rightly justified on COVID-19 and its downside impact, I wanted to highlight how we leveraged the time and available capacity resulting from these shutdowns or slowdowns to accelerate further continuous improvement tied to our Lean transformation plan.And review of this page, you can see that we remained extremely focused on continuous improvements during this slowdown. We achieve great results in our Reynosa Metals location during the quarter. The location was a bit unique and that it continued to operate through March and April, but for a week shut down tied to a government mandate.With volumes being suspended for our OE customers, we applied our resources and took advantage of the time to implement significant improvements on our shop floor.In summary, the team performed exceptionally in accelerating our plans into the period. The 32 Lean events and seven Kaizen events that were completed during the period resulted in remarkable improvements as evidenced by bringing up over 40,000 square feet in floor space for the same volumes, improving throughput performance and effective sales by over 60%, improving first time quality performance by 3,100 basis points, which impact scrap, rework, customer satisfaction, and overall OE. Labor demand was also impacted positively as you would expect through these actions. The transformation of this facility as well as others around the globe has been incredible and is presenting a solid base for us moving forward.Turning to page seven, the COVID-19 advancement across the globe was rapid and severe. We at Horizon recognized early the need to change our methods and to address through these methods and protocols the health and safety of our employees and dealing with this new threat.We successfully initiated remote work plans for our administrative activities and certain operational functions as well and have remained highly effective and productive during these changes.For those that are operating within our facilities, we've deployed safety protocols that are consistent with CDC recommendations, state and local requirements, along with adding in our own incremental requirements.I'm extremely pleased to state that we have had zero confirmed cases of the virus impacting any of our employees thus far. We continue to enhance our plans and we'll continue to be flexible for adoption of any new methods that will be brought forward by any quarter that will further improve the protocols we currently have in place.Turning to page eight, the big question that is surely on your minds is what is the company done to address the impact of COVID-19 interruptions on our business? The next two pages highlight these actions and the impact of them.Were one team at Horizon, recognizing the challenges that we would face in the short-term we took early and decisive actions as a team. Leadership stepped up with temporary salary and certain benefit reductions. The actions were taken across all levels within the company as well as at a Board level.We opted not to lay-off or for low any of our U.S.-based employees, either hourly, or salary. We chose to support our employees and not place them in the unemployment pool. Each of our employee is part of our team and albeit that we took actions tied to base compensation, and for our hourly workers to the hours work per week, we kept the team together.We protected their employment and their critical benefits during this unprecedented time. As a management team, we set our goals tied to this crisis into two overriding principles. We would enter the shutdown well-organized, but aggressively and second, that through this organized planning, we would position ourselves to be extremely efficient when the restart activities would begin.We have done both and with the retention of our employees, we are now in an excellent position with talented and well-trained employees to lead our operational restart, which is occurring now.In Europe, we transition the majority of our employees very rapidly and efficiently over to government programs. For the most part, the employees retain their realized incomes at constant level during this period with the company grossing up beyond the governmental programs where required to do so. This is a major transition and it was completed in roughly 48 hours from start to deployment. The European team did an excellent job with this.While our operations have been impacted across the Board, we never fully shut down our operations throughout the pandemic, even through today. The strength and continued demand from our aftermarket, retail, and industrial channels kept our North American and certain European sites open throughout, even under significant volume reduction.We secured government loans and grants in both the U.S. and France, along with successfully lacking in participation in government-sponsored payroll coverage and tax deferral programs.We negotiated and secured through our leaseholder partners certain lease and rent deferrals across North America and Europe. This was a great team effort and we sincerely thank those who worked closely with us.Our supplier partners also stepped up in certain cases to work with us, as we collectively define the plants to address the working capital demands that we will face as we ramp back up to full volumes.This will be a challenge for the supply chain across the Board and we jumped into this early and broadly. Our supplier partners are critical to us and they stepped up to support us in many occurrences.As you can see, we've addressed the situation across the Board and will continue to do so as we pivot hard to returning to normal production levels, which has recently begun to take shape.Turning to page nine, additional details and actions we have taken relative to liquidity and operations are summarized on this page. We successfully refinanced our U.S., Canada ABL and we utilized it as we drew down $19 million to optimize our liquidity position during the pandemic.Our lending partner was supportive and recognize that we were taking prudent actions early on to address the situation as it was unfolding to us.On April 21st, 2020, Horizon Global Company LLC, a direct U.S.-based subsidiary of Horizon Global Corporation received the loan from PNC Bank National Association for $8.7 million pursuant to the Paycheck Protection Program, under Division A Title 1 of the CARES Act. The PPP loan, which is in the form of a note dated April 18th, 2020, issued by the borrower matures in April 18th, 2022. The PPP loan bears interest at 1% per annum and is payable monthly commencing on November 15th, 2020.Funds from the PPP loan may be used for payroll, cost used to continue group health care benefits, rent, and utilities. Under the terms of the PPP loan, certain amounts may be forgiven if they are used for qualifying expenses as described in the CARES Act.The company submitted its PPP loan application in good faith in accordance with the CARES Act and the guidelines issued by the Small Business Administration, including the SBA's Paycheck Protection Program loans frequently asked questions, the FAQs.Subsequent to the company's application and receipt of the PPP loan proceeds, the SBA issued guidance that provided uncertainty regarding the company's eligibility to receive the PPP loan. We have sought clarification from the United States Department of Treasury regarding our eligibility.In the meantime, we continue to assess the FAQs and the other new guidance issued by the SBA. Absent clarity from the U.S. Treasury, we will evaluate all available options relative to it, including retention or return.If the company retains the PPP loan, we will continue to use the PPP loan proceeds in qualifying expenses. However, there is no guarantee that any portion of the PPP loan proceeds will be forgiven.We also secured a non-collateral based $5.5 million low interest loan from BNP in France. As earlier stated in my comments, we have secured an estimated $8.3 million in payroll refund related recovery in Germany, as well as similar programs in certain other countries. We are now operating in virtually all of our locations globally and are rapidly accelerating in volumes. Business is starting to move.I will come back for some highlights regarding quarter two and with closing comments later, but for now, I'll turn it over to Dennis Richardville, our CFO. Dennis, take it away.

[Dennis Richardville:]

Thank you, Terry. Good morning, everyone and thank you for joining us. Please turn to slide 10 for review of the company's consolidated results for the first quarter of 2020. As a reminder, all resolve will be on a continuing operations basis.As a result of the company's sale of its APAC segment in the third quarter of 2019, APAC is classified as discontinued operations for all periods presented in Horizon Global's financial statements. Therefore, they're not included in the discussion of ongoing results.Consolidated net sales were $163.3 million, a decrease of $14.4 million or 8.1% from the prior year comparable period. Net sales continue to be suppressed by the impacts of currency translation.On a constant currency basis, net sales decreased by $12.3 million or 6.9%. We have strong sales demand and operating results through February compared to the prior year, demonstrating that our operational improvement initiatives are taking hold.Our net sales were impacted by lower sales volumes and associated business interruption due to the economic uncertainties in all of our end markets related to COVID-19 that began in March.Net sales decrease was primarily attributable to $8.4 million of lower automotive OEM and OEF sales in our Europe-Africa segment. This was a result of lost production days in the latter part of March due to OEMs curtailing production and alignment with plant closures and economic uncertainties in response to COVID-19.Retail sales decreased $4.9 million in the America segment. The overall decrease also reflects the $2.1 million impact of the first quarter 2019 divestiture of a non-core business in Europe-Africa.Operating loss improved $6.7 million from the prior year comparable period. We reported favorable performance with an operating loss of $6.7 million compared to an operating loss of $13.4 million in the first quarter of 2019.Increased gross profit coupled with SG&A expense improvement helped drive the favorability in the quarter. The improvement was attributable to lower scrap cost, lower inventory reserves, and outbound freight costs in the America segment.In addition, a one-time $4.3 million charge related to the settlement of a potential product liability claim in Europe-Africa that did not reoccur in the first quarter of 2020 and SG&A expense improvements in personnel and discretionary spending in all segments.For adjusted EBITDA, we reported income of $2.9 million, which is $4 million better than the $1.1 million loss reported in the prior year comparable period. Higher adjusted EBITDA was primarily due to the America's operational results in the quarter, more than offsetting underperformance in Europe-Africa, which was primarily attributable to the COVID-19 economic uncertainties in the region.Now, let's turn to slide 11 to review the segment performance for the quarter. Net sales in the Americas were $92.4 million; $3.1 million lower than the prior comparable period.Net sales in the retail and industrial channels were $6.3 million lower than the prior year comparable period as a company flexed down operations at its manufacturing and distribution facilities as a result of the COVID-19 pandemic.These decreases were partially offset by aftermarket and e-commerce sales, which increased $2.6 million and $0.7 million, respectively. Net sales in the Americas also reflects increase in sales discounts, returns, and allowances related to retail, channel fines, and penalties compared to the prior year comparable period.We reported an operating profit of $2.7 million compared to an operating loss of $1.5 million from the prior year comparable period, a higher operating profit is primarily driven by lower scrap cost and inventory reserves and lower outbound freight cost in addition to improved SG&A expenses related to lower distribution center and personnel cost.Adjusted EBITDA increased to $6.1 million in the quarter as compared to $1.4 million during the prior year comparable period.Transitioning to our Europe-Africa operating segment, net sales for the segment decreased $11.3 million or 13.7% to $70.9 million compared to the prior year comparable period. This decrease was primarily due to lower volumes and the automotive OEM and OEF sales channels totaling $8.4 million, due primarily to the COVID 19 pandemic and related economic uncertainties as OEMs curtailed production in alignment with plant closures.Europe-Africa net sales were also impacted by unfavorable foreign currency translation. All said, after adjusting for the impacts of currency translation and removing the divested non-automotive business mentioned earlier, net sales decreased $7.2 million or 8.8%.We reported an operating loss of $2.5 million compared to an operating loss of $3.2 million from the prior year comparable period. Reduced loss was primarily attributable to SG&A support cost reductions realized through prior year restructuring, footprint rationalization, and a one-time $4.3 million prior year charge related to the settlement of a potential product liability claim previously discussed.Adjusted EBITDA was $2.3 million for the quarter, a decrease of $1.2 million over the prior year comparable period due to lower sales volumes mentioned earlier.As we discussed in our fourth quarter earnings call, on March 13th, 2020, we refinanced our revolving credit facility with Encina Business Credit. The facility provides for principal amount of $75 million and may be increased by up to $25 million in increments of $5 million.The revolver is secured by inventory receivables in the U.S. and Canada. But unlike the prior facility, the new facility is not secured by any collateral in Europe. Interest rate is LIBOR plus 4% with a 1% LIBOR floor in a term of up to three years. The revolvers covenant light with only a limit on capital expenditures, which provides us flexibility to execute our strategic plan.Proceeds were used to repay the outstanding balance of the existing ABL facility. The new credit facility generates increased liquidity to support the business and our strategic initiatives.Now, moving on to our balance sheet and liquidity position on slide 12. Trade working capital totaled $79 million for the first quarter of 2020, which represented a decrease of $17.4 million as compared to the first quarter of 2019 and a decrease of $10.6 million compared to the fourth quarter of 2019.Specifically, accounts receivable increased $13.2 million to $84.9 million from the prior year. Days sales outstanding was 47, a decrease of five days from the prior year. Inventory decreased $17.3 million to $119.4 million from the prior year. Days on-hand inventory was 79 days, a decrease of 11 days from the prior year. Accounts payable increased $4.9 million to $83.4 million from the prior year. Days payables on-hand was 55 days, a decrease of four days from the prior year.Turning to capitalization and leverage on page 13. As a result of the pay down of our first lien term debt in the third quarter of 2018 and our liquidity management, partially offset by increased borrowings on the ABL during the quarter in response to the economic uncertainties of COVID-19, total gross debt decreased by $161.7 million from $439.8 million in the prior year to $278.1 million in the first quarter of 2020. Taking all that into consideration, we have significantly decreased our leverage on a year-over-year basis.As for liquidity, the first quarter of 2020 totaled $50.8 million, which was comprised of $12.1 million of availability under our ABL facility, and cash on hand of $38.7 million.We believe the company is able to meet its liquidity needs to run the business and deliver on our operational and proven initiatives, including managing through the economic uncertainties and business disruptions related to COVID-19 that will impact our business.With that, I will turn it back over to Terry for his closing comments.

[Terrence Gohl:]

Thank you, Dennis. Nice job and thank you for the leadership you have provided the company during this period.As we look at page 14, we are presenting some indicators as seen during April and May. While we are not providing guidance, we felt very strongly that you should be able to see what we do relative to operational status and volumes.It may surprise many of you that we didn't completely shut down our operations with the emergence of the virus. While in Europe, the majority of sites were shut down, in North America, we continue to operate, but at a reduced level. Our product sales channels outside of the direct OEM continued to purchase from us.We are recognizing the solid improvement in sales from April to May, while remaining depressed sales have jumped by roughly 2,000 basis points for both North America and Europe as compared to pre-COVID level planning volumes.Last week, we were up to roughly 60% of our plant in North America and 41% of our plant in Europe. North America was tied to non-OEM business, while in Europe, the OEMs began their startup.In the second chart, you'll see that our operations across the globe were also in restart or acceleration mode. These operation capacity performance metrics have continued to improve week-over-week and are now reflecting several sites operating between 70% and 100% levels. This is a good sign. As the OEMs restart and ramp-up volumes around the globe, we will see this improve even more.There remain potential headwinds tied through our recovery plan as you would assume. While there are great indicators of improving customer demand for our products, the uncertainty of the economic environment and of the virus, lingers. We will look forward to the best outcome, but we'll plan for the worst as we look forward through the rest of the year.Recent IHS vehicle production volumes are down significantly in North America and Europe, while we're seeing increases in our aftermarket demands. We have retained a high level of our liquidity through the period to position us to address the upcoming demands of volume acceleration and the impact of working capital that comes with it. There is a long way to go as we sort through this, but we are seeing business return. Sustainability and volume is going to be the key.Turning to page 15. In summary, as we close our presentation for this morning, please note, we have strong momentum leading up to the onset of the COVID pandemic. In spite of the significant marked impact on operations around the globe pertaining to the COVID virus, we posted solid period-over-period results.We took early and decisive actions to mitigate the impact of the virus on our business. Relative to health and safety, we deployed strong protocols and thus far have had no employee with a recorded case. We fortified our liquidity positions through solid fundamentals, and through grants, loans, and deferrals.We flexed our operations aggressively, while positioning them for efficient return with demand. April/May indicators are promising, but we will continue to contingency plan for headwinds relative to volume sustainability and for the uncertainty of the virus.Thank you very much for your participation today. And now I'll turn it back to the operator for questions.

[Operator:]

Thank you. [Operator Instructions] The first question today comes from Josh Nichols of B. Riley. Please go ahead.

[Josh Nichols:]

Yeah. Thanks for taking the time and glad to hear everyone's saved with no reported cases of COVID. I did want to ask as you mentioned, the startup of a lot of these OEM facilities now, how do you feel about the company's inventory levels to kind of meet demand as far as the level and the mix here?

[Terrence Gohl:]

Yeah, Josh. First of all, good to hear from you. When we look at the sales decline and when the sales decline hit us, right, it was really rapid. It was concentrated at the end of March, middle to the end of March, which left us in inventory position where we were supporting normal demands, right, so it was just cut-off. So when operations went down, our inventories were quite strong because we were supporting big demand. Kaizen points, this morning, we were looking, we do a review each morning at eight.So, before this call, I was on that call. And as we looked at planning volumes for North America -- U.S. North America as an example and we looked at OE demands that we have with releases that are being updated. So, we've got coverage now through into June with the ramp-ups that we see for both our Toyota customer and Ford customer.So, we don't have to react immediately. So, if there's a little bit of a lag in our startup or anything that would impact us, we are covered from a finished goods inventory to match their demand out a couple of three weeks. So we feel pretty good about that.In Europe, it's more the same as that. They started -- OE started a little bit earlier, but they're staggering, right? They start-up, they slow down, they have high demand for line fill and they drop off a little bit as they catch their footing and get a flavor for the ability of the sub-supply -- their sub-supply chain to support them.But overall from a company, this company, we're in a good position from an inventory position to support our OES. We are seeing however, we're seeing an increase in our aftermarket demand pretty sizably week-over-week-over-week.And we're playing catch up a little bit in terms of inventory positioning and rebound with that we have buy sell. So the buy sell segment, we're working hard to increase that pipeline as we're seeing a marked increase in demand, especially in the U.S.

[Josh Nichols:]

Thanks. And then, can you comment a little bit like where's the company's liquidity situation today? I mean, obviously, a lot has changed over the last like 45 days or so you mentioned you still had you retained a substantial portion of the liquidity. I'm just trying to balance some of the headwinds with the business, but also some of the support that the companies receive from various states and country entities?

[Dennis Richardville:]

Yeah, as Terry mentioned, this is Dennis. As Terry mentioned, we've maintained a good portion of our liquidity, it has gone down some, but we are in in a good position going forward. So in North America, we drew down the lines and so we've maintained our liquidity in North America.In Europe, we are taking advantage of payroll, refunds and tax deferral programs to help maintain that liquidity. Plus, we've picked up the French loan and we got a nice, I call it nice support from both some of our suppliers and our lease holders.But overall, Josh, we've gained this thing a couple of ways in terms of outward looking. So, we've got a base forecast and we got a low end account, the headwind forecast and we're managing our liquidity across both of those.

[Josh Nichols:]

And then you say is ABL facilities like fully drawn as of today?

[Terrence Gohl:]

No, it's not. As I mentioned, there's still again in Q1, there were still $12 million availability on the ABL.

[Josh Nichols:]

Got it. Thanks so much. And then last question, could you provide a little bit of clarity you mentioned that I know you were able to receive some funds from the PPP, but there's a little bit of a question regarding like eligibility. Could you just provide a little bit of additional detail there?

[Terrence Gohl:]

Yes, when we submitted in the eligibility for the PPP was based as you said, both on-site and Lean. And at that time, our application and the receipt of the PPP loans proceeds, we met them both, right? With no questions, right? There were no further FAQs that came out at that time.After that, however, subsequent to us receiving the proceeds, the FDA issued additional guidance regarding the PPP size based criteria. Right, so specifically the size base and that was tied really to affiliation rules. So the guidance was created some uncertainty of our ability to satisfy that size based criteria.So, in light of that and with the evolving guidance, I think you probably are aware there's FAQs that continue to be issued. Now we're up to number 46. I believe that would be the last one. We've sought clarification directly to the Department of Treasury regarding that criteria and more specific to those affiliation rules that were included within it.So absence, we would expect to return the funds if we don't get any guidance. But if we retain them, which we should, we'll climb appropriately. Just keep in mind that, we didn't we didn't let anybody go.

[Josh Nichols:]

Yes.

[Terrence Gohl:]

We held on to our U.S. based employees, which was the premise of the whole program to begin with.

[Josh Nichols:]

Right. And then last question for me like, this is unprecedented times, of course, but with the auto industry plants been shut down for some time, do you have any idea or thoughts on what the cadence of the startup is going to look like? There's clearly been an increase in incentive spend and things like that to the auto OEMs. It's just something where you think they're looking to ramp-up very quickly or is it going to be kind of a measured pace here in the U.S. specifically?

[Terrence Gohl:]

It's a mixed bag in terms of intense and what I think the reality will be. Obviously, the engine of the automotive companies, they want to get back, they want to get running. They've all expressed and they've deployed safety protocols that are really looking out for their employees and I applaud them for them, we're learning off of them too, right? So, they're doing a great job there. And they're challenged and we'll be the challenges that we all have is what is the uncertainty of this virus? How does it play as things get back to some degree of normalcy, even with the countermeasures that are out there?And then second, how does the most importantly to them is how do we as a sub-supply chain to them, their total supply chain, how do we react and ensure that the pipeline of materials that they were experiencing in the managing in advance of this, can come back and sustain itself?So, I have unprecedented confidence in the OES to do the right things and to manage a situation internal to the walls of their plants. It's extending beyond that. The economic side, what is the economic conditions going to be towards vehicle sales by the consumer?And then what is the impact of that the supply chains ability to manage through this crisis themselves. I talked a little bit about, what we've done to position ourselves for the working capital demands that come with the restart.The longer this goes on receivables are not going to be in line for them, the supply chain, but payables and the demands to take on costs and working capital is going to be pretty extensive and they'll be one side -- it'll be one sided for a while. So, I think they're going to do fine. I think the return is going to be based upon two things, consumer confidence and purchasing trends and the ability to supply chain to start them.

[Josh Nichols:]

Thanks. And then last question for me, I guess. Thanks for providing the April/May highlights slide in the deck to provide a little bit more color on what's going on? Terry, are you a little bit more optimistic for things starting to get back a little bit to a normal mode in like the North America or the European market and if you kind of contrast those a little bit that would be helpful?

[Terrence Gohl:]

Yeah. And as I said, there's a complete difference in how we had to react as a company, Europe versus North America. So the European side, the mandates were significant severe and then our concentration in OE business being about 70% OE business in Europe, resulting is really taking down our operations.So, they went down fast and they went down efficiently. But they went down fast to a complete shutdown other than our activities to support future programs and certain deliverables that we had to have non-manufacturing related, but more administratively and engineering ones.While in the U.S. or in North America, we're 70% the other way and they aftermarket retail industrial type stuff. Those demands continued throughout this whole period. Now, it was depressed like I said, so it was reduced, but there were still avenues for sales.So, we partially shut down our operations, we did restrict and we took down certain hours of work load and but we kept everybody employed and we continued to ship throughout the period. So, it's kind of a tale of two regions, dictated primarily by the distribution of the business between the aftermarket and OE. One being 70/30 in the OE side in Europe and the other being 70/30 towards the aftermarket non-OE in North America.

[Josh Nichols:]

Thanks for the color. I'll be back in the queue.

[Operator:]

Thank you. At this time, we have no further questions. I would like to turn the callback over to Mr. Terry Gohl.

[Terrence Gohl:]

Well, in closing, I just want to say thanks for the support, the interest and participation in the call. They can see that our team has performed pretty done well. We're very proud of the activities that the team has done. And we look forward to emerging out of this stronger, better and as seen by some of the activities that we pulled into or pull forward into the period and leveraging time available that will come out stronger than ever. So, thanks and look forward to talk to you again.

[Operator:]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.